WOW! Reports First Quarter 2018 Results

May 11, 2018 07:00 AM Eastern Daylight Time

ENGLEWOOD, Colo.--(BUSINESS WIRE)--WideOpenWest, Inc. (“WOW!” or the “Company”) (NYSE: WOW), a leading,
fully integrated provider of residential and commercial high-speed data,
video and telephony services to customers in the United States, today
announced financial and operating results for the first quarter ended
March 31, 2018.

Business Services Subscription Revenue, Including Acquisitions and
Dispositions, grew 14.6% over the first quarter of 2017

Total Edge-Out projects have extended the network to 107,400 homes
passed; 2017 Edge-Out Nodes have achieved almost 24% penetration and
2016 Edge-Out Nodes near 32% penetration

Completed launch of 1 gig service across 95% of WOW! network

Completed previously announced $50.0 million common stock buyback;
acquiring more than 5.0 million shares through the end of the first
quarter of 2018

Board of Directors approves new $25.0 million stock buyback program;
Crestview Partners plans to purchase up to an additional $25.0 million

Entered into interest rate swap agreements for a notional amount that
covers 60% of the outstanding principal balance of floating rate debt

Financial Highlights

For the quarter ended March 31, 2018, WOW! reported Total Revenue of
$285.5 million, down $14.5 million, or 4.8%, compared to the quarter
ended March 31, 2017. The Company reported first quarter 2018 Net Loss
of $(202.7) million, including the impact of $256.4 million impairment
loss of intangibles and goodwill, and Adjusted EBITDAof
$96.3 million.

“We are encouraged by the progress we’ve made,” said Teresa Elder, chief
executive officer of WOW!. “WOW! returned to positive organic HSD RGU
growth, and we have begun investing in our strategic initiatives in
Sales and Marketing, Customer Care, and Digital Transformation. We’re
still early in the process, but we are executing on our vision of
connecting people to their world through the WOW! experience by being
reliable, easy, and pleasantly surprising, every time.”

“Adjusted EBITDA was in-line with our expectations and we reiterate our
guidance for 2018,” said Rich Fish, chief financial officer of WOW!. “We
remain encouraged by the early indications from our investments in
customers and people.”

(1)Refer to “Non-GAAP Financial Measures and Operating
Metrics,” “Unaudited Reconciliations of GAAP Measures to Non-GAAP
Measures,” and “Unaudited Transaction Adjusted Condensed Consolidated
Financial and Subscriber Information” in this Press Release for
definitions and information related to Adjusted EBITDA and Transaction
Adjusted financial information, reconciliation of such non-GAAP measures
to GAAP measures and why our management thinks it is beneficial to
present such non-GAAP measures.

Revenue

On a reported basis, for the quarter ended March 31, 2018, Total Revenue
decreased 4.8% compared to the quarter ended March 31, 2017. Total
Revenue Including Acquisitions and Dispositions decreased 3.1% to $285.5
million compared to the quarter ended March 31, 2017, which was driven
primarily by Video and Telephony RGU losses, partially offset by
increases in ARPU and Business Services Subscription Revenue growth.

On January 1, 2018, the Company prospectively adopted the FASB’s new
revenue recognition standard. There are a number of small adjustments in
the quarter related to adoption of the standard, both in revenue and
expenses. Year-over-year comparisons of the Company’s revenue components
and Adjusted EBITDA have been impacted by the adoption of these
standards.

Total subscription revenue for the quarter ended March 31, 2018, was
$263.5 million. Residential Subscription Revenue for the quarter ended
March 31, 2018, was $232.1 million. Business Services Subscription
Revenue for the quarter ended March 31, 2018, was $31.4 million.
Business Services Subscription Revenue, including the impact of
Acquisitions and Dispositions increased $4.0 million or 14.6% compared
with the quarter ended March 31, 2017.

Other business services revenue totaled $7.2 million for the quarter
ended March 31, 2018, down $3.9 million, or 35.1%, compared to the
quarter ended March 31, 2017, primarily due to decreased revenue
generated by network construction activities associated with the Chicago
network sale to a subsidiary of Verizon.

Other revenue totaled $14.8 million for the quarter ended March 31,
2018, down $13.6 million, or 47.9%, compared to the quarter ended March
31, 2017, primarily due to the reclassification of franchise fees to
residential video subscription revenue.

Costs and Expenses

Operating expenses (excluding depreciation and amortization), totaled
$157.9 million for the quarter ended March 31, 2018. Selling, general,
and administrative expenses were $39.7 million for the quarter ended
March 31, 2018.

Net Income (Loss) and Earnings (Loss) per Share

Net Loss for the quarter ended March 31, 2018, was $(202.7) million,
compared to Net Income of $72.4 million for the quarter ended March 31,
2017. Loss per share for the quarter ended March 31, 2018, was $(2.40),
compared to earnings per share of $1.09 for the quarter ended March 31,
2017. The year-over-year decline in Net Income (Loss) is attributable to
a gain on the sale of the Company’s Lawrence, Kansas, system in the
first quarter of 2017, a reduction in Total Revenue, and the impairment
losses on intangibles and goodwill, partially offset by a reduction in
interest expense. Adjusted Diluted Earnings per share for the quarter
ended March 31, 2018 was $0.19.

Adjusted EBITDA

Adjusted EBITDA for quarter ended March 31, 2018, was $96.3 million,
down 11.5% compared to Transaction Adjusted EBITDA for the quarter ended
March 31, 2017. Adjusted EBITDA margin was 33.7% in the quarter ended
March 31, 2018.

Customers

WOW! reported Total Subscribers of 798,500 as of March 31, 2018. For the
first quarter of 2018, statistical reporting was standardized to a
single reporting methodology. Previously, the data was maintained and
accumulated separately through independent processes and procedures, the
effect of which is summarized below.

ReportedDecember 31,2017

+

Effect ofStatisticStandardization

+

1Q-2018Net Additions

=

ReportedMarch 31,2018

Homes Passed

3,109,200

(700

)

20,800

3,129,300

Total Subscribers

777,300

14,200

7,000

798,500

HSD RGUs

732,700

2,500

8,700

743,900

Video RGUs

432,600

4,100

(7,700

)

429,000

Telephony RGUs

219,900

2,700

(4,300

)

218,300

Total RGUs

1,385,200

9,300

(3,300

)

1,391,200

Excluding the impact from the statistical standardization, Total
Subscribers increased by 7,000, or 0.9%, compared to December 31, 2017.
HSD RGUs totaled 743,900 as of March 31, 2018, excluding the impact from
the statistical standardization, HSD RGU’s increased 8,700, or 1.2%,
compared to December 31, 2017. HSD net additions were 6,600, excluding
the net additions from Edge-Outs.

Edge-Outs

As of March 31, 2018, Edge-Out projects now reach 107,400 homes passed
as part of the Company’s Edge-Out growth efforts started in 2016.
Edge-Out projects begun in 2016 (“2016 Edge-Out Nodes”) include 13,100
customers on such nodes, which represents almost 32% penetration with an
average of 586 days in active service.

The Edge-Out projects begun in 2017 (“2017 Edge-Out Nodes”) include
15,300 customers on such nodes, which represents almost 24% penetration
with an average of 279 days in active service.

Capital Expenditures

Capital Expenditures totaled $56.5 million for the quarter ended March
31, 2018, representing a $22.7 million decrease compared to the quarter
ended March 31, 2017, on a reported basis. Transaction Adjusted Capital
Expenditures totaled $50.6 million for the quarter ended March 31, 2018,
a decrease of $2.6 million, or 4.9%, compared to the quarter ended March
31, 2017. Transaction Adjusted Strategic Capital Expenditures, defined
as Edge-Out Capital Expenditures and Business Services Capital
Expenditures dedicated to expansion of the Company’s network, were $12.0
million for the quarter ended March 31, 2018, which represented a
decrease of $2.8 million over the Transaction Adjusted Strategic Capital
Expenditures in the quarter ended March 31, 2017, as a result of a
decrease in Edge-Out Capital Expenditures. Excluding Transaction
Adjusted Strategic Capital Expenditures, Transaction Adjusted Capital
Expenditures for the quarter ended March 31, 2018, totaled $38.6
million, which equates to 13.5% of Total Revenue for the quarter ended
March 31, 2018.

Liquidity and Leverage

As of March 31, 2018, the total outstanding amount of long term debt and
capital lease obligations was $2.271 billion. Cash and cash equivalents
as of March 31, 2018, was $36.5 million. Total Net Leverage as of March
31, 2018, was 5.3X on a LTM Transaction Adjusted EBITDA basis. Undrawn
revolver capacity totaled $292.8 million.

Interest Rate Swap

Subsequent to the end of the quarter, the Company entered into interest
rate swap agreements for a notional amount covering approximately 60% of
the outstanding principal balance of the Company’s floating rate debt to
mitigate the risk of rising interest rates.

Stock Purchase

On December 14, 2017, WOW! announced a $50.0 million common stock
repurchase program. As of March 31, 2018, the Company had completed the
common stock buyback program, having repurchased over 5.0 million shares
of the Company’s common stock in the open market, of which over 4.6
million shares were repurchased in the first quarter for an aggregate
purchase price of $45.2 million.

The Board of Directors also announced that it has authorized a new stock
repurchase program, commencing immediately, which will enable the
Company to repurchase an aggregate of $25.0 million of its outstanding
common stock. The repurchase program is expected to be executed over the
next twelve months with an objective of delivering value to
shareholders, while capitalizing on attractive market valuations.

Shares may be repurchased from time-to-time in open market transactions
at prevailing market prices, in privately negotiated transactions or by
other means in accordance with federal securities laws, including Rule
10b5-1 programs. There is no minimum number of shares that the Company
is required to repurchase and the repurchase plan may be suspended,
modified or discontinued at any time.

In addition, funds affiliated with Crestview Partners III GP, L.P. have
informed the Company that they plan to purchase up to an additional
$25.0 million of outstanding common stock in conjunction with the
Company.

Impairment

The Company performed an evaluation of the recoverability of its
franchise operating rights and goodwill as of March 31, 2018, due to a
decline in the Company’s stock price. As a result of the quantitative
impairment analysis of such indefinite-lived intangible assets and
goodwill, the Company recorded a non-cash impairment charge of $256.4
million related to franchise operating rights and goodwill in certain
markets.

Conference Call

WOW! will host a conference call on Friday, May 11, 2018, at 9:00 a.m.
Eastern to discuss the operating and financial results contained in this
press release. The conference call will be broadcast live on the
Company’s investor relations website at ir.wowway.com.
Those parties interested in participating via telephone can use the
conference call information as follows:

Call Date:

Friday, May 11, 2018

Call Time: 9:00 a.m. Eastern

Dial In:

(877) 541-5069

International: (443) 842-7607

Conf. ID:

8770819

A recording of the conference call will be available approximately two
hours after the completion of the call until June 11, 2018. The dial-in
number for this replay is (855) 859-2056.

The following unaudited condensed consolidated statements of operations
summarizes information in the Company’s Form 10-Q for the periods
indicated, as filed on May 11, 2018, with the United States Securities
and Exchange Commission (“SEC”). For ease of use, references in this
release to “WOW!” means WideOpenWest, Inc. and its subsidiaries.

WideOpenWest, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

($ in millions, except for per share data)

Three months ended

March 31,

2018

2017

Revenue

Residential subscription

$

232.1

$

232.4

Business services subscription

31.4

28.1

Total subscription

263.5

260.5

Other business services

7.2

11.1

Other

14.8

28.4

Total Revenue

$

285.5

$

300.0

Costs and expenses

Operating (excluding depreciation and amortization)

$

157.9

$

159.8

Selling, general and administrative

39.7

30.3

Depreciation and amortization

46.3

50.3

Impairment losses on intangibles and goodwill

256.4

-

Management fee to related party

-

0.5

$

500.3

$

240.9

Income (loss) from operations

$

(214.8

)

$

59.1

Other income (expense)

Interest expense

(29.1

)

(45.7

)

Gain on sale of system dispositions

-

38.7

Loss on early extinguishment of debt

-

(5.0

)

Other income, net

-

1.4

Income tax benefit

41.2

23.9

Net Income (Loss)

$

(202.7

)

$

72.4

Basic and diluted earnings (loss) per common shares

Basic

$

(2.40

)

$

1.09

Diluted

$

(2.40

)

$

1.09

Weighted-average common shares outstanding

Basic

84,479,896

66,525,044

Diluted

84,479,896

66,600,994

About WOW!

WOW! is one of the nation's leading providers of high-speed internet,
cable TV and phone serving communities in the U.S. Our vision is
connecting people to their world through the WOW! experience: reliable,
easy, and pleasantly surprising, every time. For more information,
please visit www.wowway.com.

Forward-Looking Statements

This press release may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts, included in this
release are forward-looking statements. Forward-looking statements
discuss our current expectations and projections relating to our
financial condition, results of operations, plans, objectives, future
performance and business. Forward-looking statements are not guarantees
of future performance and we caution you not to place undue reliance on
such statements. Forward-looking statements are generally identifiable
by the use of the words “may,” “will,” “should,” “expect,” “anticipate,”
“estimate,” “believe,” “intend,” “project,” “continue,” or the negative
of these words, or other similar words or terms. The forward-looking
statements included in this release are made as of the date hereof.
Except as required by law, we assume no obligation to publicly update
any forward-looking statement, even if new information becomes available
in the future or if experience or future changes make it clear that any
projected results expressed or implied in such statements will not be
realized. If we do update one or more forward-looking statements, no
inference should be made that we will make additional updates with
respect to those or other forward-looking statements. Actual results may
differ materially from those expected because of various risks and
uncertainties, many of which are beyond our control, including the wide
range of competition we face in our business; competitors that are
larger and possess more resources; dependence upon a business services
strategy; conditions in the economy, including potentially uncertain
economic conditions; our ability to secure new businesses as customers;
demand for our bundled broadband communications services may be lower
than we expect; our ability to respond to rapid technological change;
increases in programming and retransmission costs; a decline in
advertising revenues; the effects of regulatory changes in our business;
our substantial level of indebtedness; certain covenants in our debt
documents; programming exclusivity in favor of our competitors;
inability to obtain necessary hardware, software and operational
support; strain on business and resources from future acquisitions, or
the inability to identify suitable acquisitions; and other factors that
may be described from time to time in our filings with the SEC. All
forward-looking statements are expressly qualified in their entirety by
these cautionary statements.

Non-GAAP Financial Measures and Operating
Metrics

We have included certain non-GAAP financial measures in this release,
including Revenue Including Acquisitions and Dispositions, Residential
Subscription Revenue Including Acquisitions and Dispositions, Business
Services Subscription Revenue Including Acquisitions and Dispositions,
Adjusted EBITDA, Transaction Adjusted EBITDA, Transaction Adjusted
Capital Expenditures, and Adjusted Diluted EPS. The presentation of
these financial measures is not intended to be considered in isolation
or as a substitute for, or superior to, the financial information
prepared and presented in accordance with generally accepted accounting
principles in the United States of America (“GAAP”).

We believe that these non-GAAP measures enhance an investor’s
understanding of our financial performance. We believe that these
non-GAAP measures are useful financial metrics to assess our operating
performance from period to period by excluding certain items that we
believe are not representative of our core business. We believe that
these non-GAAP measures provide investors with useful information for
assessing the comparability between periods of our ability to generate
cash from operations sufficient to pay taxes, to service debt and to
undertake capital expenditures. We use these non-GAAP measures for
business planning purposes and in measuring our performance relative to
that of our competitors. We believe these non-GAAP measures are measures
commonly used by investors to evaluate our performance and that of our
competitors.

Revenue Including Acquisitions and Dispositions, Residential
Subscription Revenue Including Acquisitions and Dispositions, Business
Services Subscription Revenue Including Acquisitions and Dispositions,
and Transaction Adjusted Capital Expenditures give effect to certain
acquisitions and divestitures made by WOW! and are included herein
because they are key metrics used by management and our Board of
Directors to assess our financial performance. We believe that these
non-GAAP measures are appropriate measures of operating performance
because they are meaningful to investors by showing how certain
acquisitions and divestitures might have affected our historical
financial statements. The presentation of these measures is not made in
accordance with GAAP and our use of these terms herein varies from the
use of similar terms by other companies in our industry due to different
methods of calculation and therefore are not necessarily comparable.
These non-GAAP measures should not be considered as an alternative to
revenue, capital expenditures or any other performance measures derived
in accordance with GAAP as measures of operating performance.

Adjusted EBITDA is included herein because it is a key metric used by
management and our Board of Directors to assess our financial
performance. We believe that Adjusted EBITDA is an appropriate measure
of operating performance because it eliminates the impact of expenses
that do not relate to business performance, and that the presentation of
this measure enhances an investor's understanding of our financial
performance. Transaction Adjusted EBITDA makes certain additional
adjustments to the historical financial information that WOW! believes
is meaningful to investors by showing how certain acquisitions and
divestitures might have affected WOW!’s historical financial statements.

Adjusted EBITDA is defined by WOW! as net income (loss) before net
interest expense, income taxes, depreciation and amortization (including
impairments), impairment losses on intangibles and goodwill, gains
(losses) realized and unrealized on derivative instruments, management
fees to related party, the write-up or write-off of any asset, loss on
early extinguishment of debt, integration and restructuring expenses and
all non-cash charges and expenses (including equity based compensation
expense) and certain other income and expenses. Transaction Adjusted
EBITDA represents Adjusted EBITDA after giving effect to the impact of
acquisitions and dispositions that were completed during the relevant
periods as if they occurred at the beginning of the period presented.
The presentation of Adjusted EBITDA and Transaction Adjusted EBITDA is
not made in accordance with GAAP and our use of the terms Adjusted
EBITDA and Transaction Adjusted EBITDA may vary from others in our
industry. Adjusted EBITDA and Transaction Adjusted EBITDA should not be
considered as an alternative to net income (loss), operating income or
any other performance measures derived in accordance with GAAP as
measures of operating performance, operating cash flows or liquidity.

Adjusted EBITDA and Transaction Adjusted EBITDA have important
limitations as an analytical tool. For example, Adjusted EBITDA and
Transaction Adjusted EBITDA:

exclude certain tax payments that may represent a reduction in cash
available to us;

do not reflect any cash capital expenditure requirements for the
assets being depreciated and amortized that may have to be replaced in
the future;

do not reflect changes in, or cash requirements for, our working
capital needs; and

do not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments on
our debt.

Adjusted Diluted Earnings per Share (EPS) is included herein because it
is a key metric used by management and our Board of Directors to assess
our financial performance. Adjusted Diluted EPS is a non-GAAP financial
measure that eliminates the effect of management fees to related party,
loss on early extinguishment of debt, gain (loss) on sale of assets,
impairment losses on intangibles and goodwill, non-recurring
professional fees, M&A integration and restructuring expense, non-cash
stock compensation, and other (income) and expenses. We then add or
subtract an estimated incremental income tax effect applicable to those
items. We believe that this measurement is useful to investors as an
additional way to analyze the underlying trends in our business
consistently across the periods presented.

The presentation of Adjusted Diluted EPS is not made in accordance with
GAAP and our use of the term Adjusted Diluted EPS herein varies from the
use of similar terms by other companies in our industry due to different
methods of calculation and is not necessarily comparable. Adjusted
Diluted EPS should not be considered as an alternative to Diluted EPS or
any other performance measures derived in accordance with GAAP as
measures of operating performance.

See “Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures”
and the accompanying tables below for a reconciliation of Adjusted
EBITDA to our net income (loss), which is the most directly comparable
GAAP financial measure and a reconciliation of Adjusted EPS to Diluted
Earnings Per Share, which is the most directly comparable GAAP financial
measure.

In addition, we use the following subscriber information in this release:

Homes Passed – We report homes passed as
the number of serviceable addresses, such as single residence homes,
apartments and condominium units, and businesses passed by our
broadband network and listed in our database.

Subscribers – Because we deliver multiple
services to our customers, we report Total Subscribers as the number
of subscribers who receive at least one of our HSD, Video or Telephony
services, without regard to which or how many services they subscribe.
We define each of the individual HSD subscribers, Video subscribers
and Telephony subscribers as a revenue generating unit (“RGU”).

While we take appropriate steps to ensure subscriber information is
presented on a consistent and accurate basis at any given balance sheet
date, we periodically review our policies in light of the variability we
may encounter across our different markets due to the nature and pricing
of products and services and billing systems. Accordingly, we may from
time to time make appropriate adjustments to our subscriber information
based on such reviews.

Unaudited Reconciliations of GAAP Measures to
Non-GAAP Measures

The following table provides unaudited reconciliations of GAAP measures
to non-GAAP measures used herein for the periods indicated:

(1)See “Unaudited Transaction Adjusted Condensed Consolidated
Financial and Subscriber Information” below for a reconciliation of
Adjusted EBITDA to Transaction Adjusted EBITDA for the respective
quarters ended giving effect the divestiture of a portion of our Chicago
Fiber Network on December 14, 2017, and our divestiture of the Lawrence,
Kansas, system on January 12, 2017, as if such transactions had been
completed at the beginning of the respective periods presented herein.

(2)The income tax impacts are determined using the applicable
rates in the taxing jurisdictions in which expense or income occurred
and includes both current and deferred income tax expense (benefit)
based on the nature of the non-GAAP performance measure.

The SEC requires that pro forma financial information be presented in a
registrant’s periodic filings when events occur for which disclosure
would be material to investors, including significant business
combinations or the disposition of a significant portion of the
business. The significance of an acquired or disposed business is
determined based on the “significant subsidiary” tests specified in
Regulation S-X, Article 11, Rule 1-02(w). Although the Company has made
certain acquisitions and divestitures, such transactions do not meet the
“significant subsidiary” tests and, accordingly, the Company’s
historical financial information as filed with the SEC does not contain
pro forma financial information relating to those transactions.

Nevertheless, we make certain adjustments in this release to the
historical financial and subscriber information of the Company as filed
with the SEC (“Transaction Adjusted”) because we believe such
information would be meaningful to investors by showing how such
transactions might have affected the Company’s historical financial
statements. The unaudited Transaction Adjusted financial and subscriber
information in this release has been prepared giving effect to the
divestiture of a portion of our Chicago Fiber Network on December 14,
2017, and our divestiture of the Lawrence, Kansas, system on January 12,
2017, as if such transactions had been completed at the beginning of the
respective periods presented herein. The unaudited Transaction Adjusted
financial and subscriber information is for informational purposes only
and does not purport to represent what our results of operations,
financial or subscriber information would have been if such transactions
had occurred at any date, nor does such information purport to project
the results of operations for any future period.

The unaudited Transaction Adjusted condensed consolidated financial and
subscriber information in this release was prepared based on our books
and records for the respective periods presented for the Lawrence, KS
system and the portion of the Chicago Fiber Network that was divested.
Such historical unaudited financial and subscriber information has been
adjusted to give a Transaction Adjusted effect to events that are
directly attributable to such transactions, factually supportable and
expected to have a continuing impact on the results. The unaudited
Transaction Adjusted financial information herein does not reflect
non-recurring charges that have been incurred in connection with the
transaction including legal fees, broker fees and accounting fees.

The following table provides an unaudited reconciliation of our
residential subscription revenue to residential subscription revenue
including Acquisitions and Dispositions, business services subscription
revenue to business services subscription revenue including Acquisitions
and Dispositions, Total Revenue to Total Revenue including Acquisitions
and Dispositions, Adjusted EBITDA to Transaction Adjusted EBITDA and
Capital Expenditures to Transaction Adjusted Capital Expenditures for
the periods indicated: